In today’s ‘online first’ ecosystem, ‘digital gold’ has gained a lot of traction owing to the multiple benefits of investing in digital gold.
What is the Digital Gold investment?
It is important to learn the fact that purchasing digital gold is as genuine a process as buying gold in person. It is simply an innovative, highly convenient, and safe way to invest in gold through digital mediums.
Unlike the typical online purchases of gold, where you have to spend a specific sum of money, ‘digital gold’ investments can be made for as low as INR 100 with absolute surety of gold’s quality. Digital gold is emerging as a choice for those who want to invest in gold solely to invest. Investors who want to park their funds for the short-term too are getting attracted to buying digital gold as it is relatively stable and can provide a passive income.
Digital Gold Price Today for Last few Days in India (per gram)
Problems with Typical Gold Purchase
- The buyers need to shell out sums large enough to buy a gold ornament, coin, or bar
- The other challenge is to ensure the safety of the gold item purchased
- The quality of gold varies from authorized hallmarked gold jewelry to non-hallmarked gold. Thus, your jeweler might charge you the market rate of gold, while actually selling you a lower value of the yellow metal
How one can invest in Digital Gold?
The innovative digital gold loan option offered by platforms like Paytm has resolved these problems and brought gold within everyone’s reach. You can invest in a digital gold loan easily by taking the following steps:
- Check the latest gold prices on a platform like Paytm that allows you to buy digital gold
- Buy gold for any amount starting from INR 100 and multiples thereof
- The gold equal to the value of money spent by you on digital gold is purchased in your name and stored safely in the service provider’s vaults on your behalf (just like you put your gold in a bank locker, but, without any locker fees)
- Whenever you want, the gold can be delivered safely to your address
- Alternatively, you have the complete freedom to sell your digital gold at real-time market prices whenever desired
Why one should invest in Digital Gold?
Before hallmarking was made compulsory, the purity of gold was a major concern with buying physical gold, which, as we saw, is completely eliminated in digital products.
Security and Locker charges
Keeping physical gold is a very risky business and storing it in bank lockers adds an additional burden in the form of locker rents, which is not the case in digital gold as it can’t be stolen from our Demat accounts and additionally is tradable.
Earning an income from physical gold is not possible, instead, it requires an outflow of money if kept in lockers, but in SGBs the investors enjoy a passive income in the form of interest.
Making charges of digital gold
Investors keeping physical gold in jewelry form have to pay at least 8% making charges in addition to the price of gold while buying it, which increases the buying cost leading to reducing their returns, thus investors now tend to buy digital gold which is free from any form of making charges.
Increased awareness of digital gold online
This growing technology has increased the availability of information among the general masses. With growing information and knowledge, investors have now become aware of various forms of investing. Like investors have now started understanding the difference between endowment policies and life insurance, and are now segregating investment from insurance products.
Lower rates on FDs
There was a time when funds kept in FDs would double in five years, but as the rates have slipped way below the inflation levels (i.e. yielding negative real returns), people have started shifting to better safe asset classes.
Also with growing efficiency in our capital markets, we have seen the transformation from physical shares to Demat, combating all the difficulties in investing, similar is the case with gold. Investors have started understanding the difference between investing in gold and buying jewelry for various ornamental uses.
Using your Paytm app or purchasing digital gold online on a registered platform makes it simple, safe, and fast to buy gold for anyone. You can buy and sell digital gold from anywhere, within minutes and get complete value for it.
- No cost in storing digital gold
- Get real-time market price whenever you buy or sell digital gold
- Purchase or sell gold from the comfort of your home in a matter of minutes
- No need to spend large sums as digital gold investments start at INR 100
- Premium safety for the gold you bought
- It works as one of the best options to choose as a wedding gift for your loved ones!
1) Sovereign Gold Bonds (SGBs)
Sovereign gold bonds are issued by the Reserve Bank of India (RBI) on behalf of the government.
- These bonds were introduced under the Gold Monetization Scheme in 2015, and are issued in many tranches throughout the year by the RBI.
- Each bond represents 1 gram of gold and thus allows the investors an option to invest in gold digitally.
- These bonds have an attractive interest rate of 2.5% per annum, which is paid semi-annually by the RBI adding to the yield.
- Being backed by the government, SGBs are considered very stable with a time duration of 8 years and then a redemption option after the 5th year.
- The bonds are also tradable on stock exchanges, giving a liquidity option.
- There is a limitation on individuals of 4 kg and 20 kg on Hindu Undivided Family (HUFs) per year.
- The bond can be kept in Demat form hence eliminating the risk of losing the bond.
- The risk of storing physical gold is eliminated and the investors also earn interest on the gold which would have been lying in lockers, if kept in its physical form.
- If the bond is held till maturity i.e. for 8 years then the investor is free from the liability of capital gains tax.
- Investors can easily take loans on these SGBs. The investor will get the interest on SGBs, reducing the effective rate of the loan.
- One additional feature is that these bonds can be gifted or transferred.
- The RBI keeps launching new tranches throughout the year, but if one wishes to buy SGBs, consider buying them from the stock exchanges as the prices tend to trade at a discount of 3-5% as a result of low liquidity in the segment.
2) Gold ETFs
Exchange-traded funds are basically mutual funds whose units can be bought from stock exchanges. There are various asset management companies (AMCs) that have their own gold ETFs like SBI Gold ETF, AXIS Gold ETF, and Nippon Gold ETF, among others.
- ETFs are a way to invest in gold in small quantities.
- These are optimum for investors who want to buy gold in small quantities and keep it in a Demat format.
- These AMCs invest the money in 99.5 purity gold making it a safe investment.
- This is a good option for investors like students who have small capital and wish to have an allocation in gold.
- The purity of gold is assured at 99.5% purity
- The mutual fund industry is regulated by SEBI, hence reducing safety and security worries.
- The expense ratio of these funds is very low; the Nippon Gold ETF has an expense ratio of 0.39%, making it affordable.
- Investors can easily take a loan against these ETFs from various financial institutions.
3) Multi Commodity Exchange (MCX)
Multi-commodity exchange is one of the ways to trade in Gold.
- MCX offers a platform to trade in various commodities, like gold, silver, copper, etc. Traders use this platform to trade in commodities through futures and options.
- Traders also use the platform to hedge their position in various commodities including gold.
- The metal can be traded under various quantitative options such as 1 gram, 8 grams, 100 grams, and 1 kg units.
4) Digital Gold Wallets
- With these products, one can download mobile applications and can invest as low as INR 1 in the gold wallet through various online fund transfer facilities. This is similar to buying INR 1 gold.
- These companies store this gold in the lockers of MMTC-PAMP.
- The purity of gold is predefined and the gold can be sold and bought at any time and from anywhere through these mobile applications.
Returns on gold depend on three factors: international prices, rupee vs dollar exchange rate, and customs duty. Having said that, the gold outlook will depend on how the central banks plan to deal with high inflation rates. Moreover, geopolitical tensions and the Covid-19 pandemic, which earlier stoked fears of a recession, have started stabilizing.
Recently, the dollar index surged due to rising global inflation, and economic and political turmoil. Amidst this, investors ditched gold for the dollar and US bonds, pulling its prices down and making it a good time to buy the yellow metal. It was trading at Rs 51,130 per 10 gm on May 31.
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